AN Luxury Imports, Ltd. D/B/A BMW of Dallas, Inc., AN Luxury Imports GP, LLC, and United States Warranty Corp. v. D. Scott Southall ( 2015 )

ACCEPTED
01-15-00194-cv
FIRST COURT OF APPEALS
HOUSTON, TEXAS
4/6/2015 1:40:06 PM
CHRISTOPHER PRINE
CLERK
NO. 01-15-00194-CV
IN THE COURT OF APPEALS
FIRST DISTRICT OF TEXAS FILED IN
1st COURT OF APPEALS
HOUSTON, TEXAS HOUSTON, TEXAS
4/6/2015 1:40:06 PM
CHRISTOPHER A. PRINE
AN LUXURY IMPORTS, L.T.D. d/b/a Clerk
BMW OF DALLAS, AN LUXURY
IMPORTS GP., LLC and UNITED
STATES WARRANTY CORP.
APPELLANTS
TRIAL COURT NO. 2014-33551
VS.
D. SCOTT SOUTHALL
APPELLEE
On Appeal from the 295th District Court
Of Harris County, Texas
BRIEF OF APPELLANTS AN LUXURY IMPORTS, L.T.D.
d/b/a BMW OF DALLAS, AN LUXURY IMPORTS GP., LLC
and UNITED STATES WARRANTY CORP.
JOHNSON, DeLUCA, KURISKY & GOULD
A Professional Corporation
4 Houston Center, Suite 1000
1221 Lamar Street
Houston, Texas 77057
(713) 652-2525 – Telephone
(713) 652-5130 – Facsimile
GEORGE A. KURISKY, JR.
SBT No.: 11767700
DANIEL J. KASPRZAK
SBT No.: 11105300
MARK A. BANKSTON
SBT No.: 24001430
ATTORNEYS FOR APPELLANTS
AN LUXURY IMPORTS, L.T.D.
d/b/a BMW OF DALLAS, AN LUXURY IMPORTS GP., LLC
and UNITED STATES WARRANTY CORP.
ii
IDENTITIES OF PARTIES AND COUNSEL
The following is a complete list of names and addresses of all parties to the
trial court proceeding and their counsel:
Appellants: AN Luxury Imports, Ltd d/b/a BMW of Dallas
AN Luxury Imports GP, LLC
United States Warranty Corp.
Appellants’ Counsel: George A. Kurisky, Jr.
Daniel J. Kasprzak
Mark A. Bankston
Johnson DeLuca Kurisky & Gould P.C.
1221 Lamar Street
Suite 1000
Houston, Texas 77010
Appellee: D. Scott Southall
Appellee’s Counsel Victor S. Elgohary
6406 Arcadia Bend Ct.
Houston, Texas 77041
iii
TABLE OF CONTENTS
IDENTITIES OF PARTIES AND COUNSEL ....................................................... iii
TABLE OF CONTENTS ..........................................................................................iv
INDEX OF AUTHORITIES.....................................................................................vi
STATEMENT OF THE CASE .................................................................................. 1
REQUEST FOR ORAL ARGUMENT ..................................................................... 3
ISSUES PRESENTED...............................................................................................3
STATEMENT OF FACTS ........................................................................................4
PROCEDURAL FACTS ...........................................................................................6
SUMMARY OF ARGUMENT ................................................................................8
STANDARD OF REVIEW .....................................................................................10
ARGUMENT AND AUTHORITIES ......................................................................12
1. The Trial Court Erred by Denying Arbitration Because Southall and
BMW of Dallas Agreed to Submit Disputes to Arbitration and the
Claims Asserted Against the Defendants are Within the Scope of the
Arbitration Agreement………………………………………………12
(A) The Arbitration Agreement Between Southall and BMW
of Dallas is a Valid Contract .....................................................14
(1) All Contract Signed by Southall Must be Considered
Together Because They Pertain to the Same Transaction
of Purchasing the Vehicle .........................................................16
(2) Southall’s Arguments Regarding the Forum Selection
Clause are not Persuasive..........................................................18
iv
(3) The Arbitration Agreement Governs Southall’s
Claims Against U.S. Warranty..................................................22
(B) Southall’s Claims are Within the Scope of the Arbitration
Agreement .................................................................................28
(1) Southall’s Warranty Claims are Subject to the
Arbitration Agreement ..............................................................30
(2) Southall’s Fraud and Non-Disclosures are Subject to
the Arbitration Agreement ........................................................31
CONCLUSION ........................................................................................................33
PRAYER ..................................................................................................................33
CERTIFICATE OF COMPLIANCE ......................................................................35
CERTIFICATE OF SERVICE ...............................................................................35
v
INDEX OF AUTHORITIES
Cases
Aldridge v. Thrift Financial Marketing, LLC, 376 S.W.3d 877, 882
(Tex. App.—Fort Worth 2012, no pet.) .................................................................11
Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 270-71 (1995) ....................14
Ascendant Anesthesia PLLC v. Abazi, 348 S.W.3d 454, 462
(Tex. App.—Dallas 2011, no pet.).........................................................................27
Bally Total Fitness Corp. v. Jackson, 53 S.W.3d 352, 355 (Tex. 2001) .................13
Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) .......... 14, 15, 21, 22
Citigroup Global Markets, Inc. v. Brown, 261 S.W.3d 394, 399
(Tex. App.—Houston [14th Dist.] 2008, no pet. h.)..............................................11
Cleveland Const., Inc. v. Levco Const., Inc., 359 S.W.3d 843, 852
(Tex. App.—Houston [1st Dist.] 2012, pet. dism’d) .......................... 11, 12, 13, 15
Cotton Commercial USA, Inc. v. Cleark Creek Indep. School Dist., 397 S.W.3d 99,
103 n. 3 (Tex. App.—Houston [14th Dist.] 2012, no pet.) ........................... 10, 13
Dean Witter Reynolds v. Byrd, 470 U.S. 213, 217 (1985).......................... 10, 26, 27
Enterprise Field Services, LLC v. TOC-Rocky Mountain, Inc., No. 01–12–00345–
CV, 2013 WL 744006, at *1, n. 1 (Tex. App.—Houston [1st Dist.] Feb. 28,
2013, pet. filed) .....................................................................................................13
EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996) ..................................14
Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 55 n. 9 (Tex. 2008) .........................11
Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex.2000)
..............................................................................................................................22
vi
Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312
(Tex.2005) (per curiam) .........................................................................................20
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991) .........................14
Grant Thornton LLP v. Prospect High Income Fund,
314 S.W.3d 913, 919-20 (Tex. 2010) ....................................................................32
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744, 750
(Tex. App.—San Antonio 2000) affm’d 47 S.W.3d 486 (Tex. 2001) ...................26
Howsan v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) .............................14
In re Bank One, 216 S.W.3d 825, 826 (Tex. 2007) .................................................28
In re Certain Underwriters at Lloyd’s, 18 S.W.3d 867, 875-76
(Tex. App.—Beaumont 2000, no pet.) ................................................................26
In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005) .................11
In re D. Wilson Constr., 196 S.W.3d 774, 781 (Tex. 2006) ....................................28
In re Dallas Peterbilt, Ltd., 196 S.W.3d 161, 163 (Tex. 2006) ...............................28
In re Dillard Dept. Stores, 186 S.W.3d. 514, 515 (Tex. 2006) ...............................28
In re FirstMerit Bank, 52 S.W.3d 749, 753 (Tex. 2001) .........................................14
In re Kaplan Higher Educ. Corp., 235 S.W.3d, 206, 208 & n.1 (Tex. 2007) .........28
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex.2005) (orig.
proceeding) ...........................................................................................................12
In re Labatt Food Service, L.P., 279 S.W.3d 640 (Tex. 2009) .................. 11, 26, 28
In re Prudential, 159 S.W.3d at 283 ........................................................................27
In re Rubiola, 334 S.W.3d 220, 224 (Tex. 2011) ....................................................28
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003) .................. 12, 20
vii
Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271 (Tex.1992) ......................27
Kaye/Bassman Intern. Corp. v. Help Desk Now, Inc., 321 S.W.3d 806, 813
(Tex. App.—Dallas 2010, pet. denied) ..................................................................20
Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 38
(Tex. App.—Houston [1st Dist.] 2009, pet. denied) .............................................11
Pennzoil Coc. v. Arnold Oil Co., 30 S.W.3d 494, 498
(Tex. App.—San Antonio 2000, orig. proceeding) ...............................................28
Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 900 (Tex. 1995).....................28
Schlumberger Tech. Corp. v. Baker Hughes, Inc., 355 S.W.3d 791, 800
(Tex. App.—Houston [1st Dist.] 2011, no pet.) ................................................... 11
Smith v. National Resort Cmty., Inc., 585 S.W.2d 655, 658 (Tex. 1979) ...............32
Speedemissions, Inc. v. Bear Gate, LP, 404 S.W.3d 34, 41
(Tex.App. – Houston [1st Dist.] 2013, no pet.) ......................................... 15, 24, 25
Stary v. DeBord, 967 S.W.2d 352, 352–53 (Tex. 1998)..........................................13
Texas Petrochemicals LP v. ISP Water Management Services LLC,
301 S.W.3d 879, 884 (Tex. App.—Beaumont 2009, no pet.) ........................ 15, 27
The Courage Co., L.L.C. v. The Chemshare Corp., 93 S.W.3d 323, 333
(Tex. App.—Houston [14th Dist.] 2002, no pet.) ..................................................22
Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir. 2006) .........................................14
Young v. Villegas, 231 S.W.3d 1, 5 (Tex. App.—Houston [14th Dist.] 2007, pet.
denied) ..................................................................................................................13
viii
STATUTES
9 U.S.C. § 1 ..............................................................................................................13
9 U.S.C. § 16 ............................................................................................................13
9 U.S.C. § 16(a)(1)(C) .............................................................................................14
9 U.S.C. § 206 ..........................................................................................................14
9 U.S.C. § 32 ............................................................................................................14
TEX. BUS. & COM. CODE § 17.01 ........................................................................32
TEX. CIV. PRAC. & REM. CODE § 51.016........................................................... 10, 13
TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 ................................................. 10, 13
SECONDARY SOURCES
Restatement 2nd of TORTS § 552 ............................................................................32
ix
STATEMENT OF THE CASE
This case arises out of the December 19, 2013 purchase of a 2007 Porsche
Cayman, VIN #WPOAB29847U781868 (the “Vehicle”). Appellee, D. Scott
Southall, (“Southall”) purchased the Vehicle from AN Luxury Imports, LTD d/b/a
BMW of Dallas, Inc. (“Appellant” or “BMW of Dallas”) on December 19, 2013.
At the time of purchase, Southall signed several documents, including an
Arbitration Agreement (the “Arbitration Agreement”), and a Used Vehicle Limited
Mechanical Warranty (the “Warranty Agreement”), as part of the single agreement
to buy the Vehicle.
Southall alleges that on February 7, 2014, fifty days after the purchase, “the
engine in the Cayman suffered a severe mechanical breakdown when it threw a
piston rod in one of the cylinders during a trip to Austin, Texas.” (Cl. R. at p. 6).
Southall alleges that he attempted to make a claim for repairs under the terms of
the Warranty Agreement. (Id.) Southall alleges that United States Warranty Corp.
(“U.S. Warranty”), the Administrator for the Warranty Agreement, inspected the
Vehicle and denied the claim, stating that the mechanical failure was caused by
racing or other competition. (Id.) Southall alleges that his mechanic inspected the
Vehicle and determined that the Vehicle’s motor had “fatally exceeded its
maximum allowable RPM prior to his acquisition of the vehicle.” (Id.)
1
Southall asserts claims for (1) breach of contract (Cl. R. at p. 6), (2) unfair
settlement practices (Cl. R. at p. 7), (3) breach of the duty of good faith and fair
dealing (Cl. R. at p. 8), (4) violations of the Texas Deceptive Trade Practices Act
(Cl. R. at pp. 8 – 9), (5) negligence (Cl. R. at p. 9), (6) fraud by nondisclosure (Cl.
R. at p. 10), and (7) negligent misrepresentation (Cl. R. at pp. 10 -11). Southall
also seeks to impute liability to AN Luxury Imports GP, LLC (“ANLI,” and with
BMW of Dallas and U.S. Warranty, collectively “Defendants”), asserting that
ANLI is the general partner of BMW of Dallas, and therefore liable for the
partnership’s debts. (Cl. R. at P. 11).
BMW of Dallas and ANLI answered the suit on July 23, 2014, asserting a
general denial and a number of affirmative defenses subject to its right to compel
arbitration. (Cl. R. at pp. 13 – 18). On August 5, 2014, BMW of Dallas and ANLI
moved to compel arbitration and to stay or dismiss the lawsuit. (Cl. R. at pp. 19 -
36). U.S. Warranty answered the suit on August 25, 2014. On September 10,
2014, U.S. Warranty joined BMW of Dallas and ANLI in filing a supplement to
the Motion to Compel Arbitration and to stay or dismiss the lawsuit. (Cl. R. at pp.
98-100). On October 27, 2014, the trial court conducted a hearing on the
Defendants’ Motion to Compel Arbitration. On February 9, 2015, the trial court
entered an order denying the Defendants’ Motion to Compel Arbitration. (Cl. R. at
p. 130). It is from this order denying arbitration signed on February 9, 2015, that
2
BMW of Dallas, along with its affiliates, ANLI, and U.S. Warranty, take this
appeal. Defendants respectfully request that this Court reverse the trial court’s
order and compel arbitration because Southall and BMW of Dallas agreed to
submit any disputes to arbitration and order that the claims asserted against BMW
of Dallas, ANLI, and U.S. warranty fall within the scope of the Arbitration
Agreement.
REQUEST FOR ORAL ARGUMENT
Appellants request oral argument because some of the legal issues made the
basis of this brief are complex and concern matters of important public policy, the
holding of this case is potentially far-reaching and could affect myriad future
lawsuits.
ISSUES PRESENTED
I. THE TRIAL COURT ERRED BY DENYING ARBITRATION
BECAUSE SOUTHALL AND BMW OF DALLAS AGREED TO
SUBMIT DISPUTES TO ARBITRATION AND THE CLAIMS
ASSERTED AGAINST THE DEFENDANTS ARE WITHIN THE
SCOPE OF THE ARBITRATION AGREEMENT
(A) The Arbitration Agreement Between Southall and BMW of Dallas
is a Valid Contract
(1) All Contracts Signed by Southall Must Be Considered
Together Because They Pertain to the Same Transaction of
Purchasing the Vehicle
(2) Southall’s Arguments Regarding the Forum Selection
Clause are not Persuasive
3
(3) The Arbitration Agreement Governs Southall’s Claims
against U. S. Warranty
(B) Southall’s Claims are Within the Scope of the Arbitration
Agreement
(1) Southall’s Warranty Claims are Subject to the Arbitration
Agreement
(2) Southall’s Fraud and Non-Disclosures are Subject to the
Arbitration Agreement
STATEMENT OF FACTS
BMW of Dallas is a retailer of new and used vehicles in Dallas, Texas. (Cl.
R. at p. 33). BMW of Dallas is a limited partnership in which ANLI is the general
partner. (Cl. R. at pp. 44-45).
On or about December 19, 2013, BMW of Dallas sold the Vehicle to
Southall. (Cl. R. at p. 3). Incident to the sale, Southall executed several
documents that were part of a single transaction (the “Purchase Contract”),
including without limitation, (a) Retail Purchase Agreement (the “Sale
Agreement”); (b) the Arbitration Agreement; and (c) the Used Vehicle Limited
Mechanical Warranty (the “Warranty Agreement”). (Cl. R. at pp. 28-31; 32; 64-
65). The Arbitration Agreement specifically states that it is subject to the Federal
Arbitration Act. (Cl. R. at p. 32).
The Arbitration Agreement signed contemporaneously with the other closing
documents provides in pertinent part:
4
This Arbitration Agreement (“Agreement”) applies to
Customer(s) (“you”) who is/are in the process of: (1)
purchasing or leasing a vehicle(s) including any negotiations or
application(s) for credit or other dealings or interactions with
the Dealership (hereinafter including its employees, agents,
successors, assigns, subsidiaries, parents and affiliates); (2)
servicing any vehicle(s) with the Dealership; or (3) reviewing,
negotiating or executing any documents or agreements during
the course of interactions with the Dealership (collectively,
“Customer(s)/Dealership Dealings”). You and the Dealership
agree that arbitration will be the sole method of resolving
any claim, dispute, or controversy (collectively, “Claims”)
that either Party has arising from Customer(s)/Dealership
Dealings. Such Claims include, but are not limited to, the
following: (1) Claims in contract, tort, regulatory, statutory,
equitable, or otherwise; (2) Claims relating to any
representations, promises, undertakings, warranties,
covenants or service; (3) Claims regarding the interpretation,
scope, or validity of this Agreement, or arbitrability of any
issue; (4) Claims between you and Dealership; and (5) Claims
arising out of or relating to your application for credit, this
Agreement and/or any and all documents executed, presented or
negotiated during Customer(s)/Dealership Dealings, or any
resulting transaction, service, or relationship, including that
with the Dealership, or any relationship with third parties
who do not sign this Agreement that arises out of the
Customer(s)/Dealership Dealings.
(Cl. R. at p. 32). (emphasis added).
The Sale Agreement references the Arbitration Agreement, stating “If you
have signed an arbitration agreement, it is incorporated into and made a part
of this agreement for all purposes” and “If You have executed an Arbitration
Agreement in conjunction with this Agreement such Arbitration Agreement
5
shall be incorporated herein by reference and made a part of this
Agreement.” (Cl. R. a pp. 30 and 31).
Southall claims that he did not request service on the Vehicle from BMW of
Dallas. (Cl. R. at p. 40). This lawsuit is premised on the alleged obligation and
failure of BMW of Dallas to repair Vehicle. If Southall did not ask BMW of
Dallas to make repairs to the Vehicle, his claims are not ripe.
Southall alleges that on February 2, 2014, the Vehicle’s engine suffered a
severe mechanical breakdown during a trip to Austin, Texas. (Cl. R. at p. 6).
Southall alleges that the engine threw a piston rod in one of the cylinders. (Id.).
Southall alleges that he informed U.S. Warranty of his claim. (Cl. R. at p.
6). He further alleges that an adjuster acting on behalf of U.S. Warranty inspected
the Vehicle in Houston, Texas. (Id.). Southall alleges that “BMW of Dallas,
through its agent U.S. warranty, denied the claim stating that the breakdown was
caused by racing or other competition.” (Id.).
PROCEDURAL FACTS
On or about June 11, 2014, Southall filed a lawsuit in the 295th District
Court of Harris County Texas, asserting claims for breach of contract, violations of
the Texas Insurance Code, breach of the duty of good faith and fair dealing,
violations of the Texas Deceptive Trade Practices Act, negligence, fraud by
nondisclosure, and negligent misrepresentation. (Cl. R. at pp. 4-12). On July 23,
6
2014, BMW of Dallas and ANLI answered the suit subject to compelling
arbitration. (Cl. R. at pp. 13-18). BMW of Dallas and ANLI’s answer included a
paragraph stating that the claims against them were subject to an arbitration
agreement and demanded arbitration. (Cl. R. at p. 13).
On August 5, 2014, BMW of Dallas and ANLI moved to compel arbitration
and for the stay or dismissal of the lawsuit. (Cl. R. at pp. 19-36). On August 24,
2014, Appellant filed a response to the Motion to Compel Arbitration. (Cl. R. at
pp. 37 – 68). In his response, Appellant argued that (1) the purchase agreement
provides that exclusive venue and jurisdiction lies in the courts of the county in
which the dealer is located and that there is no evidence that the Arbitration
Agreement “ties to” the Retail Purchase Agreement; read together, the agreements
should be construed as giving the Appellant an option to bring a claim in the forum
of his choosing (Cl. R. at pp. 38-40); and (2) Appellants complaint is based on the
Defendants’ alleged failure to perform under the Used Vehicle Limited Mechanical
Warranty, which has no arbitration provision and is therefore outside the scope of
the Arbitration Agreement. (Cl. R. at pp. 40-41). On August 25, 2014, Defendants
filed their reply and amended reply in support of the Motion to Compel
Arbitration. (Cl. R. at pp. 68-76 and 77-85). On August 25, 2014, Defendants also
filed a Response to Motion to Sever Subject to Motion to Compel Arbitration and
Supplement to Motion to Compel Arbitration. (Cl. R. at pp. 86-97).
7
On August 25, 2014, U.S. Warranty answered the lawsuit, subject to
compelling arbitration. On September 10, 2014, U.S. Warranty joined BMW of
Dallas and ANLI in a supplemental Motion to Compel Arbitration. (Cl. R. at pp.
98-100). On October 24, 2014, Appellant filed a response to the supplemental
motion to compel arbitration, arguing that (1) the claims against U.S. Warranty are
not subject to arbitration because U.S. Warranty is not a party to the Arbitration
Agreement; and (2) the claims against U.S. Warranty are not subject to arbitration
because there is no evidence that U.S. Warranty is an affiliate of BMW of Dallas.
(Cl. R. at pp. 101-129).
On October 27, 2014, the trial court conducted a hearing on the Defendants’
Motion to Compel Arbitration. The trial court did not rule on the Motion to
Compel Arbitration at the October 27, 2014, hearing. On February 2, 2015, the
trial court entered an order denying Defendants’ Motion to Compel Arbitration.
(Cl. R. at p. 130).
SUMMARY OF ARGUMENT
The trial court erred by denying Defendant’s Motion to Compel Arbitration
because Southall and BMW of Dallas agreed to submit disputes, such as the instant
case, to arbitration and Southall’s claims in this case are within the scope of the
Arbitration Agreement. Because Southall and BMW of Dallas executed the
Arbitration Agreement at the time of sale of the Vehicle as part of one sales
8
transaction and intended to submit any dispute between them to arbitration, a valid
agreement to arbitrate exists.
All claims asserted by Southall fall within the scope of the Arbitration
Agreement because they are expressly encompassed within the terms of the
Arbitration Agreement. Each of Southall’s causes of action are based on one of
two contentions: (1) Defendants have not fulfilled their duties under the Warranty
Agreement by repairing the Vehicle, or (2) BMW of Dallas had prior knowledge of
the condition of the Vehicle’s engine, had a duty to disclose that condition, and
failed to do so. The Arbitration Agreement expressly and unambiguously includes
claims relating to warranties and claims relating to representations within its scope
of claims.
U.S. Warranty is not a signatory to the Arbitration Agreement. (Cl. R. at p.
32). The claims asserted by Southall against U.S. Warranty are factually
intertwined with the claims asserted against BMW of Dallas and ANLI. In fact,
the claims are identical. Additionally, the Warranty Agreement, Arbitration
Agreement and the Sale Agreement were all signed as components of one
transaction and must be read together. Southall agreed to arbitrate his claims
against U.S. Warranty. Moreover, Southall seeks to assert rights and retain
benefits under the Warranty Agreement and Sale Agreement, but wishes to avoid
9
application of the Arbitration Agreement. Southall is equitably estopped from
doing this.
Even if the claims against U.S. Warranty cannot be compelled to arbitration,
the Court must order the claims against BMW of Dallas and ANLI to arbitration.
The Supreme Court of the United States made it clear that the Federal Arbitration
Act requires arbitrable claims to be compelled to arbitration, even where the result
would be “the possibly inefficient maintenance of separate proceedings in different
forums.” Dean Witter Reynolds v. Byrd, 470 U.S. 213, 217 (1985). Therefore, the
trial court’s order denying arbitration of the Southall’s claims must be reversed. If
the parties or this Court wish to avoid piecemeal litigation, this Court can order all
claims asserted against the collective Defendants to be arbitrated together.
The Court has jurisdiction to consider this interlocutory appeal of the trial
court’s denial of the Motion to Compel Arbitration pursuant to TEX. CIV. PRAC. &
REM. CODE § 51.016 because the Arbitration Agreement is governed by the FAA.
STANDARD OF REVIEW
Interlocutory review of a trial court’s order denying arbitration under the
Federal Arbitration Act (“FAA”) is allowed under Texas law. TEX. CIV. PRAC. &
REM. CODE ANN. § 51.016 (West Supp. 2012); Cotton Commercial USA, Inc. v.
Clear Creek Indep. School Dist., 397 S.W.3d 99, 103 n. 3 (Tex. App.—Houston
[14th Dist.] 2012, no pet.) (“The Texas Civil Practice and Remedies Code now
10
provides for the interlocutory appeal of a trial court’s denial of a motion to compel
arbitration under the FAA.”); Cleveland Constr., Inc. v. Levco Constr., Inc., 359
S.W.3d 843, 850–51 (Tex. App.—Houston [1st Dist.] 2012, pet. dism’d) (same).
A trial court’s denial of a motion to compel arbitration is generally reviewed
for an abuse of discretion. Schlumberger Tech. Corp. v. Baker Hughes, Inc., 355
S.W.3d 791, 800 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (citing Okorafor
v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 38 (Tex. App.—Houston [1st Dist.]
2009, pet. denied)). A trial court abuses its discretion if it clearly fails to analyze
the law correctly or apply the law to the facts. Citigroup Global Markets, Inc. v.
Brown, 261 S.W.3d 394, 399 (Tex. App.—Houston [14th Dist.] 2008, no pet. h.)
(citing In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005).
However, “[w]hen an appeal from a denial of a motion to compel arbitration turns
on a legal determination,” a de novo standard is applied. Forest Oil Corp. v.
McAllen, 268 S.W.3d 51, 55 n. 9 (Tex. 2008); Schlumberger Tech Corp., 355
S.W.3d at 800. Both the validity and enforceability of an arbitration agreement are
questions of law and subject to de novo review. Aldridge v. Thrift Financial
Marketing, LLC, 376 S.W.3d 877, 882 (Tex. App.—Fort Worth 2012, no pet.)
(validity); In re Labatt Food Service, L.P., 279 S.W.3d 640, 643 (Tex. 2009)
(enforceability).
11
A party seeking to compel arbitration must establish that there is a valid
arbitration agreement and that the claims raised fall within that agreement's scope.
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex.2005) (orig.
proceeding); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003);
Cleveland Constr., 359 S.W.3d at 852. Although there is a strong presumption
favoring arbitration, that presumption arises only after the party seeking to compel
arbitration proves that a valid arbitration agreement exists. J.M. Davidson, 128
S.W.3d at 227; Cleveland Constr., 359 S.W.3d at 852. Ordinary principles of state
contract law determine whether there is a valid agreement to arbitrate. Kellogg
Brown & Root, 166 S.W.3d at 738; Cleveland Constr., 359 S.W.3d at 852.
ARGUMENT & AUTHORITIES
I. THE TRIAL COURT ERRED BY DENYING ARBITRATION
BECAUSE SOUTHALL AND BMW OF DALLAS AGREED TO
SUBMIT DISPUTES TO ARBITRATION AND THE CLAIMS
ASSERTED AGAINST THE DEFENDANTS ARE WITHIN THE
SCOPE OF THE ARBITRATION AGREEMENT
The trial court erred by denying Defendants’ Motion to Compel Arbitration
because Southall and BMW of Dallas agreed to submit disputes, such as the instant
case, to arbitration and Southall’s claims in this case are within the scope of the
Arbitration Agreement. The Court has jurisdiction to consider this interlocutory
appeal of the trial court’s denial of the Motion to Compel Arbitration pursuant to
12
TEX. CIV. PRAC. & REM. CODE § 51.016 because the Arbitration Agreement is
governed by the FAA.
Under Texas law, “[i]nterlocutory orders are not appealable unless explicitly
made so by statute.” Young v. Villegas, 231 S.W.3d 1, 5 (Tex. App.—Houston
[14th Dist.] 2007, pet. denied) (citing Stary v. DeBord, 967 S.W.2d 352, 352–53
(Tex. 1998)). Statutes authorizing interlocutory appeals must be strictly construed.
Young, 231 S.W.3d at 5 (citing Bally Total Fitness Corp. v. Jackson, 53 S.W.3d
352, 355 (Tex. 2001)). In this case, Section 51.016 of the Civil Practice and
Remedies Code provides:
In a matter subject to the Federal Arbitration Act (9 U.S.C.
Section 1 et seq.), a person may take an appeal or writ of error
to the court of appeals from the judgment or interlocutory order
of a district court, county court at law, or county court under the
same circumstances that an appeal from a federal district
court’s order or decision would be permitted by 9 U.S.C.
Section 16.
TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (West Supp. 2012) (emphasis
added). As evidenced by the plain language of section 51.016 and established
precedent, a person may appeal an order denying arbitration if it would be allowed
under 9 U.S.C. § 16.” See id.; Cotton Commercial USA, Inc., 397 S.W.3d at 103,
n. 9; Cleveland Constr., Inc., 359 S.W.3d at 850-51; Enterprise Field Services,
LLC v. TOC-Rocky Mountain, Inc., No. 01–12–00345–CV, 2013 WL 744006, at
*1, n. 1 (Tex. App.—Houston [1st Dist.] Feb. 28, 2013, pet. filed). Under 9 U.S.C.
13
§ 16, an appeal may be taken from an order denying an application to compel
arbitration. 9 U.S.C. § 16(a)(1)(C); see also 9 U.S.C. § 206. Because the subject
matter of this interlocutory order concerns the FAA and an appeal would be
allowed under federal law, this court has proper jurisdiction pursuant to section
51.016 of the Civil Practice and Remedies Code.
(A) The Arbitration Agreement Between Southall and BMW of Dallas
is a Valid Contract
Federal and state law strongly favors arbitration. In re FirstMerit Bank, 52
S.W.3d 749, 753 (Tex. 2001); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90
(Tex. 1996); Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996).
The FAA applies to all contracts involving interstate commerce and was enacted to
overcome courts’ reluctance to enforce arbitration agreements. See 9 U.S.C. § 32;
Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 270-71 (1995). The FAA
establishes a strong federal policy in favor of enforcing arbitration agreements.
Howsan v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002); Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991). Indeed, a presumption
exists in favor of agreements to arbitrate under the FAA. Cantella, 924 S.W.2d at
944. Courts must resolve any doubts about an agreement to arbitrate in favor
of arbitration. Id. (emphasis added); Tittle v. Enron Corp., 463 F.3d 410, 418 (5th
Cir. 2006). A party opposing arbitration bears the burden of defeating it. Cantella,
924 S.W.2d at 944. An arbitration agreement is valid and enforceable if an
14
arbitration agreement exists and the claims asserted are within the scope of the
agreement. Speedemissions, Inc. v. Bear Gate, LP, 404 S.W.3d 34, 41 (Tex.App. –
Houston [1st Dist.] 2013, no pet.); Texas Petrochemicals LP v. ISP Water
Management Services LLC, 301 S.W.3d 879, 884 (Tex. App.—Beaumont 2009, no
pet.). Once a party seeking to compel arbitration establishes that an arbitration
agreement exists and that the claims are within the scope of the arbitration
agreement, the court has no discretion but to compel arbitration and stay its
proceedings pending arbitration. Cantella, 924 S.W.2d at 944.
In this case, Southall and BMW of Dallas executed an Arbitration
Agreement at the time of sale. (Cl. R. at p. 32). Ordinary principles of state
contract law determine whether there is a valid agreement to arbitrate. Cleveland
Const., Inc. v. Levco Const., Inc., 359 S.W.3d 843, 852 (Tex. App.—Houston [1st
Dist.] 2012, pet. dism’d). The elements of a valid contract are (a) an offer, (b) an
acceptance, (c) a meeting of the minds, (d) each party’s consent to the terms, and
(e) execution and delivery of the contract with the intent that it be mutual and
binding. Id. “Under generally accepted principles of contract interpretation, all
writings that pertain to the same transaction will be considered together, even if
they were executed at different times and do not expressly refer to one another.”
Id. at 853.
15
(1) All Contracts Signed by Southall Must Be Considered
Together Because They Pertain to the Same Transaction of
Purchasing the Vehicle
On December 19, 2013, Southall and BMW of Dallas executed the (a) Sale
Agreement; (b) the Arbitration Agreement; (c) the Warranty Agreement. (Cl. R. at
pp. 28-31, 32, and 64-65).
The Arbitration Agreement signed contemporaneously with the other closing
documents provides in pertinent part:
This Arbitration Agreement (“Agreement”) applies to
Customer(s) (“you”) who is/are in the process of: (1)
purchasing or leasing a vehicle(s) including any negotiations or
application(s) for credit or other dealings or interactions with
the Dealership (hereinafter including its employees, agents,
successors, assigns, subsidiaries, parents and affiliates); (2)
servicing any vehicle(s) with the Dealership; or (3) reviewing,
negotiating or executing any documents or agreements during
the course of interactions with the Dealership (collectively,
“Customer(s)/Dealership Dealings”). You and the Dealership
agree that arbitration will be the sole method of resolving
any claim, dispute, or controversy (collectively, “Claims”)
that either Party has arising from Customer(s)/Dealership
Dealings. Such Claims include, but are not limited to, the
following: (1) Claims in contract, tort, regulatory, statutory,
equitable, or otherwise; (2) Claims relating to any
representations, promises, undertakings, warranties,
covenants or service; (3) Claims regarding the interpretation,
scope, or validity of this Agreement, or arbitrability of any
issue; (4) Claims between you and Dealership; and (5) Claims
arising out of or relating to your application for credit, this
Agreement and/or any and all documents executed, presented or
negotiated during Customer(s)/Dealership Dealings, or any
resulting transaction, service, or relationship, including that
with the Dealership, or any relationship with third parties
16
who do not sign this Agreement that arises out of the
Customer(s)/Dealership Dealings.
(Cl. R. at p. 32). (emphasis added).
The Sale Agreement references the Arbitration Agreement, stating “If you
have signed an arbitration agreement, it is incorporated into and made a part
of this agreement for all purposes” and “If You have executed an Arbitration
Agreement in conjunction with this Agreement such Arbitration Agreement
shall be incorporated herein by reference and made a part of this
Agreement.” (Cl. R. at pp. 30 and 31).
Similarly, the Sale Agreement references the Warranty Agreement, stating
“USED VEHICLE LIMITED WARRANTY APPLIES. We are providing the
attached Used Vehicle Limited Warranty in connection with this transaction.
Any implied warranties are limited in duration to the terms of the Used
Vehicle Limited Warranty”. (Cl. R. at p. 30).
The Sale Agreement also states “The provisions of this Agreement shall
survive the consummation of Your purchase of the Vehicle.” (Cl. R. at p. 31).
The closing documents signed at the time of sale between Southall and
BMW of Dallas constitutes a valid contract because they meet the requirements of
the general contract law of Texas. BMW of Dallas accepted Southall’s offer to
buy the Vehicle at the price set forth in the Retail Purchase Agreement, subject to
the additional terms and conditions contained in the contemporaneously executed
17
documents. The terms of the sale were clearly set forth in the sales documents.
Both parties demonstrated their consent to the sale by executing the sales
documents. There was a meeting of the minds on all terms and conditions of the
sale of the Vehicle, as evidenced by the sales documents. The sales documents
were delivered to Southall along with the Vehicle with the intent that they be
mutual and binding. Southall continues to acknowledge that the Sale
Agreement and the Purchase Agreement are parts of the same transaction,
and has offered sworn testimony to that effect on two separate occasions,
stating:
“On December 19, 2013, I purchased a 2007 Porsche
Cayman VIN #WPOAB29847U781868 (“Porsche”) from
BMW of Dallas. As part of my purchase, I also received
a Used Vehicle Limited Mechanical Warranty through
United States Warranty Corp. on the vehicle.”
(Cl. R. at pp. 66 and 128) (emphasis added).
Because Southall and BMW of Dallas executed the Arbitration Agreement
and Warranty Agreement at the time of the sale of the Vehicle as part of one sales
transaction, a valid agreement to arbitrate exists.
(2) Southall’s Arguments Regarding the Forum Selection
Clause are not Persuasive
Southall’s arguments against compelling arbitration in this case are without
merit. Southall argues Paragraph 17 of the Sale Agreement provides for exclusive
venue and jurisdiction, precluding the Court from compelling Southall to arbitrate.
18
(Cl. R. at p. 38). The Sale Agreement addresses arbitration as an alternative means
of resolving disputes. The forum selection clause cannot be read to eradicate
BMW of Dallas’s rights to compel arbitration.
Appellant cites to Paragraph 17 of the Sale Agreement, which states in part:
The sole and exclusive venue for any dispute or litigation
arising under or concerning this Agreement shall be in the
courts located in and for the county in which Dealer is
located, and the parties irrevocably consent to the
jurisdiction of said courts.
(Cl. R. at pp. 31 and 38). From this provision, Appellant argues that Southall and
BMW of Dallas intended to give “the courts” sole and exclusive jurisdiction over a
dispute arising under the contract, and that the courts of Harris County provide a
proper venue because ANLI is owned by a corporation that is owned by another
corporation that “has over 10 locations in Harris County.” (Cl. R. at p. 39).
Appellant then contends that there is no evidence tying the Arbitration Agreement
to the Sale Agreement. (Id.).
There is no conflict between the Arbitration Agreement and the Sale
Agreement. The first page of the Sale Agreement expressly incorporates the
Arbitration Agreement into the Sale Agreement. (Cl. R. at p. 30). Paragraph 10,
on the second page of the Sale Agreement also incorporates the Arbitration
Agreement by reference. (Cl. R. at p. 31). Appellant selectively quoted Paragraph
17. The remainder of Paragraph 17, states:
19
Any and all arbitration proceedings shall also take place in
the county where the dealer is located, unless agreed
otherwise by the parties. This Agreement shall be construed
and governed by the laws of the state in which Dealer is
located. In the event of any dispute or litigation arising
under this Agreement, the prevailing party shall be entitled
to recover its costs and expenses including court costs and
reasonable attorney’s fees.
(Cl. R. at p. 31). Upon reading all of the Sale Agreement and all of Paragraph 17,
it is readily apparent that Southall and BMW of Dallas did not intend to give the
courts of the State of Texas (in the county most convenient for Southall) exclusive
jurisdiction over disputes arising from Southall’s Purchase Contract.
Even if there were conflicting language in the Sale Agreement and the
Arbitration Agreement, which Defendants dispute, the Court must ascertain the
true intentions of the parties as expressed in the written instruments. See J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). The Court must
consider the entire writing and attempt to harmonize and give effect to all the
provisions of the contract by analyzing the provisions with reference to the whole
agreement. Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex.
2005) (per curiam); J.M. Davidson, 128 S.W.3d at 229. When the provisions of a
contract appear to conflict, courts attempt to harmonize the provisions and assume
the parties intended every provision to have some effect. Kaye/Bassman Intern.
Corp. v. Help Desk Now, Inc., 321 S.W.3d 806, 813 (Tex. App.—Dallas 2010, pet.
denied). Courts must resolve any doubts about an agreement to arbitrate in favor
20
of arbitration. Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996).
From the plain language of the Sale Agreement and the Arbitration Agreement in
this case, it is clear that the parties intended there to be one contract for the sale of
the Vehicle – not several separate contracts that can be interpreted apart from one
another as Southall urges.
Southall’s position is illogical and would render meaningless the writings
because the closing documents work hand-in-hand. The Sale Agreement is the
conditional sales contract in which Southall offered to purchase the Vehicle, while
the Arbitration Agreement provides that all disputes arising out of Southall’s
dealings with the dealership are to be submitted to binding arbitration. The
Warranty Agreement is a third portion of the overall Purchase Contract. The three
documents are indispensable parts of the Purchase Contract and cannot be severed
in the manner advocated by Southall.
It is clear from the language of the Arbitration Agreement that Southall and
BMW of Dallas intended to submit any disputes arising out of the Purchase
Contract to binding arbitration. The forum selection provision in the Sale
Agreement governs only if Southall and BMW of Dallas had not agreed to submit
all disputes to Arbitration. This is the only sensible construction in light of the
terms of the three Agreements.
21
Because the trial court abused its discretion by failing to resolve any doubts
about the language of the various contract documents in favor of arbitration, the
Court should reverse the trial court’s order denying arbitration.
(3) The Arbitration Agreement Governs Southall’s Claims
against U. S. Warranty
Appellant next argues that the Warranty Agreement does not contain an
arbitration provision, precluding the Court from compelling Southall to arbitrate
his claims against U.S. Warranty.
It is well established that instruments pertaining to the same transaction may
be read together to ascertain the parties’ intent, even if the parties executed the
instruments at different times and the instruments do not expressly refer to each
other. The Courage Co., L.L.C. v. The Chemshare Corp., 93 S.W.3d 323, 333
(Tex. App.—Houston [14th Dist.] 2002, no pet.) (citing Fort Worth Indep. Sch.
Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex.2000)). A court may
determine, as a matter of law, that multiple documents comprise a written contract,
and in appropriate instances, may construe all the documents as if they were part of
a single, unified instrument. Id. (citing Fort Worth Indep. Sch. Dist., 22 S.W.3d at
840). As demonstrated above, courts must resolve any doubts about an agreement
to arbitrate in favor of arbitration. Cantella & Co., 924 S.W.2d at 944. Southall
and BMW of Dallas executed the Arbitration Agreement on the same day as the
Sale Agreement and Warranty Agreement as a single transaction whereby Southall
22
purchased the Vehicle. The Arbitration Agreement provides that it covers “(1)
purchasing or leasing a vehicle(s) including any negotiations or application(s) for
credit or other dealings or interactions with the Dealership; (2) servicing any
vehicle(s) with the dealership; and reviewing, negotiating or executing any
documents or agreements during the course of interactions with the Dealership.”
(Cl. R. at p. 32) (emphasis added). The Arbitration Agreement further states:
You and the Dealership agree that arbitration will be
the sole method of resolving any claim, dispute, or
controversy (collectively, “Claims”) that either Party has
arising from Customer(s)/Dealership Dealings. Such
Claims include, but are not limited to, the following: (1)
Claims in contract, tort, regulatory, statutory,
equitable, or otherwise; (2) Claims relating to any
representations, promises, undertakings, warranties,
covenants or service; (3) Claims regarding the
interpretation, scope, or validity of this Agreement, or
arbitrability of any issue; (4) Claims between you and the
Dealership; and (5) Claims arising out of or relating to
your application for credit, this Agreement and/or any
and all documents executed, presented or negotiated
during the Customer(s)/Dealership Dealings, or any
resulting transaction, service, or relationship, including
that with the Dealership, or any relationship with third
parties who do not sign this Agreement that arises out
of the Customer(s)/Dealership Dealings.
(Cl. R. at p. 32) (emphasis added).
It is clear from the language of the Arbitration Agreement that Southall and
BMW of Dallas intended to submit any disputes arising out of, inter alia, the Sale
Agreement, the Warranty Agreement and/or the Arbitration Agreement to binding
23
arbitration. Because the trial court erred by resolving any doubts about the
language of the various contract documents against arbitration, the Court should
reverse the trial court’s order denying arbitration.
Southall cites to Speedemissions, Inc. v. Bear Gate, L.P. for support for his
contention that he cannot be compelled to arbitrate his claims against U.S.
Warranty because U.S. Warranty is not a signatory to the Arbitration Agreement.
See Speedemissions, Inc. v. Bear Gate, L.P., 404 S.W.3d 34 (Tex.App. – Houston
[1st Dist.] 2013); (Cl. R. at p. 103).
Speedemissions is readily distinguishable from this case. Speedemissions,
Inc. sought to purchase a business in Houston, Texas, Mr. Sticker, Inc.
Speedemissions, Inc., 404 S.W.3d at 37. Mr. Sticker owned and operated six
vehicle inspection stores. Id. Mr. Sticker owned the land and improvements on
which two of the stores operated. Id. Speedemissions Inc. did not wish to
purchase the land and improvements. Id. Prior to the sale of Mr. Sticker’s stock,
Mr. Sticker’s owners formed a limited liability company and a limited partnership.
Id. The limited liability company was made the managing partner of the
partnership. Id. Then the land and improvements in question were transferred
from Mr. Sticker to the limited partnership. Id. Speedemissions, Inc. entered into a
stock purchase agreement with Mr. Sticker, and separate lease agreements with the
limited partnership. Id. The stock purchase agreement contained an arbitration
24
provision. Speedemissions, Inc., 404 S.W.3d at 38. The lease agreements did not.
Speedemissions, Inc., 404 S.W.3d at 40. The stock purchase agreement did not
reference the lease agreements. Speedemissions, Inc., 404 S.W.3d at 39. The lease
agreement did not reference the stock purchase agreements. Id. The lease
agreements had a term of five years and provided Speedemissions, Inc. the option
of renegotiating and renewing the leases for an additional five years. Id. At the
end of the initial lease period, Speedemissions, Inc. and the limited partnership did
not successfully renegotiate the leases. Speedemissions, Inc., 404 S.W.3d at 40.
Speedemissions, Inc. instituted arbitration against the limited partnership, which
was dismissed on the request of the limited partnership. Id. Speedemission, Inc.
then filed suit against the limited partnership and moved to compel arbitration. Id.
The trial court denied the request, which generated an appeal. Id. In affirming the
trial court’s order, this Court stated:
“The language of the Stock Purchase Agreement and Lease
Agreements demonstrates that the parties intended for these
agreements to be complete, separate agreements. The Stock
Purchase Agreement and the Lease Agreements are between
different parties. They each have a distinct and separate
purpose. And they were not executed as part of a single
stock purchase and sale/leaseback agreement.”
Speedemissions, Inc., 404 S.W.3d at 43.
In this case, the Sale Agreement, Arbitration Agreement and Warranty
Agreement are all between the same parties, Southall and BMW of Dallas. (Cl. R.
25
at pp. 28-31, 32, and 64-65). Each Agreement was executed as part of one
transaction; the sale of the Vehicle.
More importantly, the Arbitration Agreement specifies that the parties agree
to arbitrate claims against each other as well as claims against third parties who are
not signatories to the Arbitration Agreement. (Cl. R. at p. 32). U.S. Warranty
did not sign the Arbitration Agreement and did not agree to arbitrate
Southall’s claims. Southall did sign the Arbitration Agreement. Southall did
agree to arbitrate his claims against U.S. Warranty.
Whether an arbitration agreement binds a nonsignatory is a gateway matter
for the court, not the arbitrator, to determine, unless the parties clearly and
unmistakably provide otherwise. In re Labatt Food Service, L.P., 279 S.W.3d 640
(Tex. 2009). The parties must arbitrate any claims that fall within the scope of the
arbitration agreements, even though piecemeal litigation might result. Helena
Chemical Co. v. Wilkins, 18 S.W.3d 744, 750 (Tex. App.—San Antonio 2000)
aff’d 47 S.W.3d 486 (Tex. 2001) (citing Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 220–21 (1985)); In re Certain Underwriters at Lloyd’s, 18 S.W.3d 867,
875-76 (Tex. App.—Beaumont 2000, no pet.) (“Even when arbitrable and non-
arbitrable claims are intertwined and arise out of the same transaction, the
arbitrable claims are still subject to arbitration.”) Recent cases have held that
claims that are not otherwise arbitrable can become arbitrable when factually
26
intertwined with arbitrable claims. Ascendant Anesthesia PLLC v. Abazi, 348
S.W.3d 454, 462 (Tex. App.—Dallas 2011, no pet.) (citing Texas Petrochemicals
LP v. ISP Water Mgmt. Servs. LLC, 301 S.W.3d 879, 885 (Tex. App.—Beaumont
2009, no pet.); see also Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271
(Tex. 1992) (holding misrepresentation claims grounded in a legal theory distinct
from contract claims yet factually intertwined are subject to the arbitration
provision of the contract). “To be within the scope of an arbitration provision, the
allegations need only be factually intertwined with arbitrable claims or otherwise
touch upon the subject matter of the agreement containing the arbitration
provision.” In re Prudential, 159 S.W.3d at 283.
In this case, U.S. Warranty is not a signatory to the Arbitration Agreement,
but Southall’s claims against U.S. Warranty are factually intertwined with his
claims against the other defendants. Even if the Court chooses not to compel
Southall’s claims against U.S. Warranty to arbitration, the Supreme Court of the
United States has made it clear that the FAA requires arbitrable claims to be
compelled to arbitration, even where the result would be “the possibly inefficient
maintenance of separate proceedings in different forums.” Dean Witter Reynolds,
470 U.S. at 217. Therefore, the trial court’s order denying arbitration of Southall’s
claims must be reversed. If the parties or this Court wish to avoid piecemeal
litigation, this Court can order all of Southall’s claims to be arbitrated together.
27
(B) Southall’s Claims are Within the Scope of the Arbitration
Agreement
The party moving for arbitration must show that the claim falls within the
scope of the arbitration agreement. In re Rubiola, 334 S.W.3d 220, 224 (Tex.
2011); In re Dallas Peterbilt, Ltd., 196 S.W.3d 161, 163 (Tex. 2006); In re Dillard
Dept. Stores, 186 S.W.3d. 514, 515 (Tex. 2006); Prudential Secs. Inc. v. Marshall,
909 S.W.2d 896, 900 (Tex. 1995). To determine whether the claim is within the
scope of the arbitration agreement, the court examines the terms of the agreement
and the factual allegations of the plaintiff’s claim. See In re Rubiola, 334 S.W.3d
at 225. Generally, federal law governs the scope of the arbitration agreement. In
re Labatt Food, 279 S.W.3d 640, 643 (Tex. 2009).
Many arbitration agreements provide that “any controversy or claim arising
from or relating” the contract is subject to arbitration. E.g., In re Kaplan Higher
Educ. Corp., 235 S.W.3d, 206, 208 & n.1 (Tex. 2007); In re Bank One, 216
S.W.3d 825, 826 (Tex. 2007). Under a broad arbitration clause, arbitration can be
compelled even though the particular dispute is not specifically covered. See In re
D. Wilson Constr., 196 S.W.3d 774, 781 (Tex. 2006). If the facts alleged in
support of the claim have a “significant relationship” to or are “factually
intertwined” with the contract that is subject to the arbitration agreement, the claim
is within the scope of the agreement and is arbitrable. Pennzoil Coc. v. Arnold Oil
Co., 30 S.W.3d 494, 498 (Tex. App.—San Antonio 2000, orig. proceeding).
28
The claims asserted by Appellee are within the scope of the Arbitration
Agreement because his claims relate to representations, warranties, and service.
For Plaintiff to argue that he did not ask BMW of Dallas to service the Vehicle is
disingenuous at best. This majority of this lawsuit centers on Southall’s alleged
damages because the Vehicle has not been repaired. Southall acknowledges
making a “claim” to U.S. Warranty for the repair of the Vehicle. (Cl. R. at p. 6).
The Warranty Agreement requires that any repair made under its coverage be made
at BMW of Dallas or any other ANIL dealership. (Cl. R. at p. 65). The remainder
of Southall’s claims are based on his assertion that the Vehicle’s engine had been
subjected to abuse before he purchased the Vehicle, that BMW of Dallas somehow
knew that the engine had been subjected to such abuse, and was therefore
damaged, and that BMW of Dallas had a duty to disclose this information to him
but failed to do so. (Cl. R. at pp. 6, and 9).
Additionally, Southall’s argument that he was not in the process of
purchasing or leasing a vehicle or reviewing, negotiating or executing any
documents or agreements, and thus not within the scope of the Arbitration
Agreement is defeated by the plain language of the Sale Agreement. The Sale
Agreement, which incorporates the Arbitration Agreement, states “The provision
of this Agreement shall survive the consummation of Your purchase of the
Vehicle”. (Cl. R. at p. 31). This provision evidences a meeting of the minds and
29
creates an enforceable right in BMW of Dallas to compel the arbitration of
Southall’s claims, even after he completed his purchase.
(1) Southall’s Warranty Claims are Subject to the Arbitration
Agreement
Southall alleges that he acquired a Used Vehicle Limited Mechanical
Warranty when he purchased the Vehicle. (Cl. R. at p. 5). He alleges that shortly
after his purchase, the Vehicle experienced a severe mechanical breakdown. (Cl.
R. at p. 6). He alleges that he informed U.S. Warranty of his claim, and that U.S.
Warranty’s claims adjuster denied his claim stating that the breakdown was caused
by racing. (Id.).
On the above allegations, Southall asserts claims for (1) breach of contract,
(2) unfair settlement practices, (3) breach of the duty of good faith and fair dealing,
(4) violations of the Texas Deceptive Trade Practices Act, and (5) negligence.
The Arbitration Agreement specifically contemplates each of these causes of
action. The Arbitration Agreement states that it applies to Customers who are in
the process of purchasing a vehicle. (Cl. R. at p. 32). It was in the course of
purchasing the Vehicle that Southall executed this agreement. The Arbitration
Agreement states that Southall and BMW of Dallas agree to arbitrate any claim,
dispute or controversy that either party has that arises from their course of dealing.
(Id.). Specifically enumerated among the claims subject to arbitration, by way of
example only, are “Claims in contract, tort, regulatory, statutory, equitable, or
30
otherwise” and “Claims relating to any representations, promises, undertakings,
warranties, covenants or service”, and “Claims arising out of or relating to… any
resulting transaction, service, or relationship, including that with the Dealership, or
any relationship with third parties who do not sign this agreement...” (Id.).
As demonstrated above, and by the trial court’s record, the Arbitration
Agreement is very broad. The Arbitration Agreement specifically mandates the
arbitration of claims arising out of alleged breaches of the Purchase Contract,
including the Warranty Agreement. Every cause of action asserted by Southall that
is based on BMW of Dallas’ refusal to repair the Vehicle is subject to mandatory
arbitration. The Court should overrule the trial court’s order denying Defendants’
Motion to Compel Arbitration, and order that all of Southall’s are subject to
mandatory arbitration.
(2) Southall’s Fraud and Non-Disclosures are Subject to the
Arbitration Agreement
Southall alleges that after the Vehicle’s engine failed, Southall’s mechanic
inspected the Vehicle. During that inspection, Southall allegedly learned that the
Vehicle’s engine had “fatally exceeded its maximum allowable RPM prior to his
acquisition of the vehicle.” (Cl. R. at p. 6). Southall further alleges that BMW of
Dallas knew of the Vehicle’s prior misuse and the condition of its engine and
failed to disclose the information to Southall. (Cl. R. at p. 9).
31
On these allegations, Southall asserts causes of action for (1) violation of the
Texas Deceptive Trade Practices Act, (2) fraud by nondisclosure, and (3) negligent
misrepresentation. (Cl. R. at pp. 9-11). These claims are levied solely against
BMW of Dallas.
Once again, the express terms of the Arbitration Agreement mandate that
these claims must be resolved through Arbitration. The nondisclosures of which
Southall complains allegedly occurred while he was in the process of “purchasing
or leasing a vehicle(s) including any negotiations or application(s) or other
dealings or interactions with the Dealership”. (Cl. R. at p. 32). The Deceptive
Trade Practices Act is a statutory claim. TEX. BUS. & COM. CODE § 17.01 et seq.
Fraud by nondisclosure is a common law tort claim. See. Smith v. National Resort
Cmty., Inc., 585 S.W.2d 655, 658 (Tex. 1979) (citing Restatement 2nd of Torts §
551 (1977), which addresses liability for nondisclosure under the common law).
Negligent misrepresentation is also a common law tort claim. See Grant Thornton
LLP v. Prospect High Income Fund, 314 S.W.3d 913, 919-20 (Tex. 2010) (citing
Restatement 2nd of Torts, § 552 (1977), which addresses liability for negligent
misrepresentation under the common law). The Arbitration Agreement names tort
claims and statutory claims as claims subject to mandatory arbitration. (Cl. R. at p.
32). The Arbitration Agreement also identifies claims relating to any
representations or promises as subject to mandatory arbitration. The Court should
32
overrule the trial court’s order denying Defendants’ Motion to Compel Arbitration,
and order that all of Southall’s are subject to mandatory arbitration.
CONCLUSION
The trial court’s order denying arbitration should be reversed because
Southall and BMW of Dallas agreed to submit disputes, such as the instant case, to
arbitration and Southall’s claims in this case are within the scope of the Arbitration
Agreement. Southall’s claims against U.S. Warranty fall within the scope of the
Arbitration Agreement because the Arbitration Agreement expressly provides that
claims against third party are subject to arbitration if they arise as a result of
Southall’s dealings with BMW of Dallas. Additionally, Southall’s claims against
U.S. Warranty are factually intertwined with his claims against BMW of Dallas.
Even if Southall’s claims against U.S. Warranty cannot be compelled to arbitration
(and they can), the arbitrable claims must be compelled to arbitration even if the
result is piecemeal litigation.
PRAYER
WHEREFORE, PREMISES CONSIDERED, AN LUXURY IMPORTS,
L.T.D. d/b/a BMW OF DALLAS, AN LUXURY IMPORTS GP., LLC and
UNITED STATES WARRANTY CORP. respectfully pray that this Court reverse
the Order of the trial court denying arbitration dated February 9, 2015, and grant
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Defendants such and further relief, both general and special, at law or in equity, to
which it may show itself to be justly entitled.
Respectfully submitted,
JOHNSON DELUCA KURISKY & GOULD, P.C.
By: /s/ George A. Kurisky, Jr.
GEORGE A. KURISKY, JR.
SBT No: 11767700
DANIEL J. KASPRZAK
Texas Bar No. 11105300
MARK A. BANKSTON
SBT No.: 24001430
4 Houston Center
1221 Lamar Street, Suite 1000
Houston, Texas 77010
(713) 652-2525 - Telephone
(713) 652-5130 - Facsimile
ATTORNEYS FOR APPELLANTS, AN
LUXURY IMPORTS, L.T.D. d/b/a BMW
OF DALLAS, AN LUXURY IMPORTS
GP., LLC and UNITED STATES
WARRANTY CORP.
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CERTIFICATE OF COMPLIANCE
As required by Rule 9.4, Texas Rules of Appellate Procedure, the
undersigned certifies that this brief contains 7,140 words, exclusive of the portions
described in Rule 9.4(i)(1).
/s/George A. Kurisky, Jr.
George A. Kurisky, Jr.
CERTIFICATE OF SERVICE
I certify that on the 6th day of April, 2015, a true and correct copy of the
foregoing document was forwarded as indicated to all counsel of record listed
below:
Via email: victor@vselgohary.com
and U.S. Mail
Victor S. Elgohary
6406 Arcadia Bend Ct.
Houston, Texas 77041
Counsel for Plaintiff, D. Scot Southall
/s/ Mark A. Bankston
Mark A. Bankston
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